11 December 2018

Welcome to Market Brief, the Electricity Authority’s weekly update on regulatory and market developments.


Distribution pricing consultation

No-one wants to pay more than they should for power, but that’s what will happen if distribution pricing doesn’t change soon.

We are reviewing the principles for distribution pricing to clarify our expectation that the price anyone pays reflects the costs of the electricity distribution service they are getting.  

New technologies like electric vehicles and solar panels could have all kinds of unintended impacts if the current distribution pricing structures remain in place. One example is: if someone gets solar panels they can reduce the share they pay of the distribution network costs, meaning other consumers on that network will pay a higher share.

The Authority has now published a consultation paper to seek views on its proposal for amending the distribution pricing principles and introducing a monitoring regime.

Submissions close at 5 pm on Tuesday, 19 February 2019.

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Review of regulatory settings for official conservation campaigns consultation

We have published a consultation paper on our Review of the regulatory settings for official conservation campaigns

Our review is being co-ordinated with Transpower’s consultation on its Review of the security of supply forecasting and information policy, also published today.

The consultations propose various changes designed to improve the reliability of the system, including:

  • the inclusion of contingent hydro storage in hydro risk curves
  • setting the start- and stop-triggers for official conservation campaigns
  • setting triggers for the release of contingent hydro storage
  • using floors to avoid contingent hydro storage being inaccessible.

Both consultations close at 5 pm on Monday, 4 February 2019.

The Authority and Transpower will be will be holding an industry briefing on both of the consultation papers in Wellington on Thursday, 20 December 2018. More details to follow. 

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Update on transmission pricing methodology (TPM) review

The Authority is making good progress on the TPM review since our previous update in June 2018.

The cost benefit analysis (CBA) and modelling of the effects on customers are well under way. Once the CBA is finalised we’ll be in a position to complete the finer details of our proposal.

We aim to publish our proposal for consultation in mid-2019, currently targeting release in June 2019. 

Visit our website for more information about the project and progress to date.

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Undesirable trading situation (UTS) claim update

On 8 November 2018 we received a claim that an undesirable trading situation (UTS) had been occurring in the wholesale electricity market since 15 September 2018 and was ongoing. The claim relates to several factors affecting the wholesale market, including the wholesale market information disclosure obligations and market-making in the hedge market.

The Authority requested clarification from the claimants on some aspects of the claim and received this on 19 November 2018. Our request and the claimants’ response are on the UTS webpage.

The Authority’s Board has considered a draft set of facts and analysis of the UTS claim. We are carrying out further analysis and the Authority is expecting to release its decision on the claim before the end of February 2019.

To avoid confusion – the claimants to this UTS are Electric Kiwi Limited; Pulse Energy Limited; Switch Utilities Limited (Vocus); Flick Energy Limited and Vector Limited.

We are aware that others, including Fonterra and Oji Fibre Solutions, have publicly signalled they support the claim. However, these additional parties are not formally claimants.  

Unlike a compliance investigation into a breach of the Code, we do not invite affected parties to join the claim.

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Investigator appointed

We are investigating an alleged breach of the Electricity Industry Participation Code 2010 (Code) by Genesis Energy Limited (Genesis). 

Paua to the People Limited (Paua) has alleged that Genesis contacted a Genesis customer who was switching to Paua (a save-protected trader), during the save protection period, to persuade the customer to terminate the electricity supply arrangement the customer had entered into with Paua. As a save–protected trader, Paua is protected from such behaviour under the switch save protection scheme regime in the Code. 

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Investigator appointed 

We are investigating alleged breaches of the Security of Supply Forecasting and Information Policy (SOSFIP) by Transpower New Zealand Limited as the system operator. The SOSFIP is incorporated by reference into the Code. 

It is alleged the system operator has incorrectly determined and published the hydro risk curves by not excluding Lake Tekapo contingent hydro storage as is required by the SOSFIP.

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Authority will propose changes to constrained-on provisions of the Code

The Authority continually monitors market pricing and payments to ensure the market operates in an efficient and competitive manner. The Board has noted the recent significant increase in generator constrained-on payments and is concerned some of these payments do not reflect the cost to generate.

We are reviewing the constrained-on provisions of the Code. In early 2019, we intend to consult on a proposal to remove constrained-on payments which are made to generators when plant has been dispatched down at its maximum offered ramp rate (ie, ramp-rate-constrained).

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New exemptions granted

We have granted and gazetted three new exemptions (Exemption Nos. 272, 273, and 274).

Advanced Metering Services Limited (272) and Arc Innovations Limited (273) are exempted from complying with the obligation in clause 45(2)(c) and (2)(d) of the Code to identify and select the minimum number of installations set out in Table 8 of Schedule 10.1 of the Code. 

Payless Energy Limited (274) is exempted from complying with the obligations in clauses 15.37A and 15.38(1) of the Code to have regular audits and to obtain and maintain certification as a reconciliation participant.

The exemptions came into force on Thursday, 6 December 2018. The Gazette notices, including our reasons for granting the exemptions, are available on our website.

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Stress test scenarios unchanged for the January–March quarter of 2019

The stress test scenarios previously published on the Authority's website will apply for the January−March quarter of 2019. There is no change from the previous quarter.

The stress-testing regime requires certain participants in the wholesale electricity market to apply a set of standard stress tests to their market position, and report the results to their Board and to the NZX as the independent registrar appointed by the Authority.

Questions about the stress tests can be directed to marketoperations@ea.govt.nz. Please include 'stress test' in the subject line.

Further information is available on our website.

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Reminder: Participant registration and information update

We remind participants it is their responsibility to register with the Authority as a participant, and ensure the information they provide for registration is up to date. Please check all information is up to date including contact names and details that may have changed. All changes and updates to the participants register may be directed to compliance@ea.govt.nz.

Failure to register or to update information is an offence under section 31 of the Electricity Industry Act 2010.

The participants register is available on our website.

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Current consultation

Second consultation on electricity information exchange protocols (EIEPs)

Following on from our 2017 operational review of EIEPs, we have released a consultation paper that proposes further changes to EIEP1 and EIEP5A.

Started: 20/11/2018; Ending: 18/12/2018 5pm

Consultation calendar

Download and view our high-level consultation calendar (PDF)

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